Petrol price war boosts UK retail sales

ONS says the better-than-expected performance of retailers in July was largely due to cut-price fuel deals from supermarkets

Petrol price cuts by supermarkets and bargain offers in the high street prompted a rise in retail sales last month.

Figures from the Office for National Statistics showed a 0.3% increase in the volume of sales, defying City expectations that poor July weather would cause a small drop in spending.

The ONS also revised up its estimate of retail sales in June to show a monthly rise of 0.8%, prompting speculation that the economy might be growing more strongly than had been thought.

Officials had previously pencilled in an increase in June sales of just 0.1% when they published second quarter growth figures showing a 0.7% decline in national output.

The ONS said the better-than-expected performance of the high street in July had been largely due to cut-price fuel deals from supermarkets. Without this boost to spending, retail sales would have been flat.

The July data included only two days of the Olympics – 27 and 28 July – and the ONS said feedback from retailers suggests there was no impact on sales from the Games last month.

“If there is to be any evidence of an ‘Olympic effect’ lifting the economy, we should expect to see that in next month’s figures,” said Jeremy Cook, chief economist at foreign exchange company World First.

He added: “The fact that the rise came from fuel sales emphasises the fact that problems persist on the high street. Both sport and leisurewear retailers have failed to capitalise on either Euro 2012 or Wimbledon this year.

“The landscape for retail sales will continue to ‘bump along the bottom’ throughout H2, as the pressure on wages from inflation reduces the propensity of people to spend money on anything but the bare essentials.”

Price pressure in the high street fell to its lowest level in almost three years as retailers sought to attract customers. The measure used by the ONS to measure inflation in the retail trade rose by 0.2% in the year to July.

James Knightley at ING said the July numbers were “pretty encouraging, especially with decent upward revisions to June. Together with Wednesday’s firm looking jobs numbers we continue to have doubts about the message from GDP report, suggesting the UK is in a deepening recession.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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